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Monday, 21 December 2015

Gold edged up on Monday, adding to sharp gains from the previous trading session, as weakness in the dollar and equities helped the metal recoup some losses from a U.S. interest rate hike last week.

Concerns that demand for non-interest-paying bullion will take a hit from the rate hike continue to cast a shadow, and will likely limit any rally in gold.

Spot gold had ticked up 0.3 percent to $1,069 an ounce by 0339 GMT, adding to the 1.4 percent gain on Friday.

"We believe that trading conditions will start to thin out, but that does not mean trading ranges will necessarily narrow," said INTL FCStone analyst Edward Meir.

Liquidity will start to drop as trading enters the last two weeks of the year.

"Given the uninspiring chart patterns, we have to suspect that the path of least resistance remains lower still for the precious group as a whole, exacerbated by a stronger dollar and a more aggressive Fed," Meir said.

The metal saw some safe-haven bids on Friday after global equity markets fell sharply as slumping oil prices raised concerns about slower growth, while the dollar slipped against the yen on views the Bank of Japan may not ease policy as much as expected.

But the outlook for the dollar is bullish as the Fed is set to hike rates further next year.

Gold's Friday rally followed a 2 percent loss in the session prior to that, the metal's biggest single day loss in five months, as the Federal Reserve raised U.S. interest rates for the first time in nearly a decade.

Brent crude prices fell on Monday to their lowest since 2004 on renewed worries over a global oil glut, with production around the world remaining at or near record highs and new supplies looming from Iran and the United States.

Brent futures fell as low as USD 36.32 per barrel in overnight trading around 0000 GMT, the weakest since 2004, before edging back to USD 36.49 per barrel by 0203 GMT.

US West Texas Intermediate (WTI) futures were down 20 cents at USD 34.53 per barrel and close to last Friday's 2015 lows.

Both benchmarks are down more than two-thirds since mid-2014 when the rout began.

Analysts said a strong dollar following last week's US interest rate hike, which makes oil consumption more expensive for countries using different currencies, as well as a renewed increase in US oil rig counts were weighing on crude prices.

"The US oil rig count bounced back this week, up by 17 (to 541), putting an end to four consecutive weekly declines," Goldman Sachs said.